A partial easing of US sanctions on Venezuela on humanitarian grounds could pump Caribbean-loading cargoes into the Aframax and Suezmax markets, reviving the traditional local and long-haul Caribbean-loading routes. Uncertainty on the Biden administration’s approach to sanctioned oil-producing countries leaves the Americas dirty tanker market awaiting signals reversing previous administration policies.
The sanctions on Venezuela, issued in a series of six Executive Orders, effectively blocked all commercial transactions and property pertaining to the government of Venezuela. This suspended roughly 500,000 b/d of Venezuelan crude exports to US Gulf Coast refineries and shut down US exports of diluents to lighten Venezuela’s extra heavy crude oil production in the Orinoco Belt, significantly impacting tanker flows in the Caribbean and the Gulf of Mexico region.
Platts Analytics estimated in its Political Risk Special Report that a lifting of sanctions on Venezuela could potentially release up to 500,000 b/d into the market, equivalent to 1.5 Aframaxes per day. Additional cargoes in the Americas market would be a welcome sign to shipowners, who continue to see record-low freight rates roughly since June 2020. Nevertheless, a skyrocketing rebound in Venezuelan exports is not expected, since Venezuela’s crude production infrastructure is in a considerable state of deterioration. Venezuela’s average crude production in 2020 was 1.84 million b/d lower than the average in 2015.
Considering bipartisan opposition to Maduro’s regime, however, Platts Analytics regarded a full lifting of sanctions unlikely, forecasting only an additional 200,000 b/d increase out of Venezuela by December 2021 following an easing of sanctions.
Intra-regional Caribbean-loading Aframax spot fixtures drop 75%
In 2020, a year after the issuance of Executive Order No. 13857, which expanded all previous sanctions on Venezuela, only 1% out of 145 Aframax shipments making the Caribbean-USGC voyage throughout the year, loaded in Venezuelan ports, whereas in 2018, a year before the order, up to 63% of flows on that route loaded in Venezuela, according to the Platts tradeflow software cFlow.
Platts fixture logs showed a similar trend, as the number of Caribbean-loading Aframax spot fixtures decreased by 65% to 75% in 2020 compared to the 2016-2018 period or to 87 fixtures in 2020 from a range of 250-350 during the 2016-2018 period. In 2019, the year sanctions were implemented, the log counts 136 Caribbean-loading Aframax spot fixtures.
On the Caribbean-Transatlantic runs, 53% of Aframax shipments loaded in Venezuela in 2018, whereas in 2020, the number was down to 30%…
